Most of us have financial goals, even if we don't give them much thought. Maybe you'd like to get out of debt or open an IRA.
Those are all great, but have you asked God about his goals for you? Setting faith financial goals, that's our topic today. I'm Steve Moore, MoneyWise Live with Rob West is next. I'm Rob West, and I'm your host, Steve Moore. Not from this perspective, Ron, great to have you here. Well, it's always good to be here, Rob. And by the way, happy New Year. Thank you. You have obviously years of experience helping folks reach their financial objectives.
What I love about what you bring to the table, Ron, is not only have you thought and written about this deeply, but you were able to see God's principles of finance worked out in a professional setting throughout your career. Yeah. You know, I always said whenever I would talk to somebody that if you aim at nothing, you'll hit it every time.
Okay. And I think there's four reasons why we need to set goals. One, they give us direction and purpose.
They're finish lines. They're something that we are in our mind consciously headed toward. Secondly, they help to crystallize our thinking about what we really want to accomplish. And later on in this, I want to talk about some faith goals that I set 40-some years ago. Thirdly, they give us motivation. When we set a goal, all of a sudden we were moving. And my mentor, Dr. Hendrick, said that resurrection is difficult at any level, so we need to get up and make it moving.
I love that. And fourth is that because it's a goal, it's future-oriented, and only God is in the future, it's a statement of God's will for my life. So those are four reasons to set goals that are practical and pretty obvious and extraordinarily helpful if we got no further than that.
Yes. Well, I think it's really important. Draw the distinction between a faith goal and what we think of typically when we perhaps enter into a secular view of goal setting. Well, a faith goal is driven by the process. Anybody can set goals in all kinds of books that have been written for years on goal setting. But a faith goal, it really begins with the question, God, what would you have me to do?
And you ask him that question and begin to crystallize your thinking by writing it down. And ultimately, you come to a position that you can say, I believe that God would have me do this, whatever this is. We really need a process for that, and the process I use is I journal a lot, and then I keep journaling, and I keep journaling, and I keep praying, and I keep journaling. And eventually, I come to a conclusion and say, I believe this is what God would have me to do and the direction He would have me to go. Now, obviously, if you're in a process of journaling and praying, those goals may change over time. Isn't that true?
Oh, absolutely. I think that in many cases, the goals that we don't achieve teach us something. So, goal setting is not magical, and it's not something that every believer does, but I think it provides motivation, as I mentioned.
But I guess I come back to that statement I made earlier, if I aim at nothing, I'll hit it every time. So, I start out aiming at something, but that something may change due to circumstances driven by what God has done. Ron, you've been at this a long time, and you've obviously run many successful organizations, including a financial planning organization. And yet, I would imagine, as it relates to even your finances, you and Judy, you're still setting goals?
Oh, yeah. Yeah, we set goals. Actually, a financial plan is a goal. So, when you prepare a financial plan, whatever that might be, you're in effect saying, this is what I believe God would have me to do, and so you're setting some goals. Very good. We'll get into the process and much more about faith goal setting right around the corner.
That's right. Author, teacher, and all-around good guy Ron Blue with us today on MoneyWise Live. Rob West, your host. I'm Steve Moore. We're pre-recorded because of the holiday, so we won't be taking calls.
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That's moneywiselive.org. Ron, great to have you with us today as we talk about setting faith financial goals. And this is something that all of us should be thinking about. As you said, we really can't achieve what God has for us in this area of finances if we're not thinking about and planning for what we're doing with God's money. And that's why having a process, understanding what goal setting is all about, and really leaning into it, and if you're married as a couple, is really key.
Let's talk about that just for a moment. As husband and wife, it's really important you do this together, right? Yeah, it really is. There's something called goal incongruity, and that is where he has one set of goals and she has another set of goals. And if they haven't come together as a couple around the goals, there's an opportunity for conflict, for one thing. But also, you'll never accomplish as much by yourself as you can with a spouse.
And I'm going to quote my mentor again. Dr. Hendricks, he said, God did not give you a spouse to frustrate you but to complete you. So, men and women think differently. Husband and wife think differently for many reasons. So, coming around a set of goals or a goal is really an important thing.
I love it. All right, let's talk about why more people don't set faith goals. You know, we've said it's really important and yet so many fail to do it.
You have some observations as to why that might be. Yeah, in fact, as recent as my quiet time this morning, Paul said, forgetting what lies behind. And in Isaiah, it says, don't cling to things of the past. So, the first thing to not do is to look at the past and say, I can't because. And the second thing is to remember that God says, I can do more than you can think, ask, or even imagine. So, when you're setting a goal, you don't feel yourself constrained by circumstances, if you will. You say, okay, God, what would you have me to do? So, I don't look at the past in the sense of relying on the past because I want the future to be different.
And secondly, I got to continue to remember that God does things in a way bigger than what I could ever, ever think. And then third, we've already talked about, is never set a goal apart from your spouse. So, those are just kind of the three things not to do when you're setting goals. What about fear of failure? Obviously, as you work with folks and have for many years in a financial planning and investment context, you know, when we set goals, we run the risk of not achieving them. And perhaps it's easier in some contexts just to say, I'm not going to do it.
Well, that's true. But if you think about the logic of what you said just now that if I don't set a goal, I can't fail. Okay? Well, a goal is always a statement of God's will. So, you can't fail.
Okay? If you're saying the process is, what would God have me to do? And I set that goal, then He may change it, but I haven't failed.
He has just guided me. That's a good word. By the way, I try not to think about the logic of what I say often. So, thank you for asking that.
That was a great word. Let's talk about the process of setting faith financial goals. Because if we convince folks, and I hope we have, that this is really important and we get past some of those obstacles, then really having a process that you can lean into helps to make it more manageable, more something you can really accomplish.
So, walk us through that. You just said something really important, even though the logic is even though the logic is. The thing that is important is that the goal that we set is God's goal. So, if I'm not spending time with Him, I'm never going to be able to set a goal. Secondly, you record your impressions as you go through journaling or setting the goals. You know, Judy and I used to take, when the kids were young, two weekends a year where we would go away and Saturday morning of the weekend, we would go into separate rooms and we would write down all of the things that we wanted to talk about and what goals we wanted to set. And then we spent the afternoon comparing our list. And what we found is that we were congruent in about 85% of the cases and 15% not. And that's where the conflict came.
And that's where the growth came. And my life changed after every one of those weekends of setting a goal with my wife that was a goal built on prayer of what we thought God would have us to do. So, lastly, I'd like to say on a goal, it needs to be specific. Because if it's not measurable in some way, it's not really a goal. I could say, for example, I want to be a good father. Well, I do. That's a purpose statement.
That's not a goal. But coming out of those weekends, Judy and I had, I set a goal that I would take each child out to breakfast once a week. We had five.
So, we started with the oldest. And I took her out once a week for breakfast. And then the second one, when she went to college, the second one, the third one, the fourth one. And when we got to the fifth one, we said, well, there's no need to take him out to breakfast because he's the only one at home now. Until he said, Dad, could we go to breakfast? And a lot of the time when we went to breakfast together, it would be just grunting at each other like males tend to do, as opposed to any really deep theological discussions. It was, what's your day look like today, Michael?
Well, not so good or I don't know. And then back to the pancakes. That's right. And after several years of that, then his new goal became to lose all that weight. But, you know, Ron, when it comes to setting goals, some people might be frustrated by the fact, because I've thought this way in the past, that, you know, how can I set a faith financial goal when the target keeps moving, the economy keeps changing?
Maybe something happens in your personal life, you lose a job, an expense comes up you weren't planning on. So you have to be willing, I guess, to flex or to adjust somewhere in that context. I'm glad you asked that question, Steve, because it's an illustration that I'd forgotten about until you just asked the question. And that is that I say, set your goals and write them down on the seashore. And don't put them in concrete, because circumstances will change.
So you put them on the sand. And when the waves come, whatever that wave might look like, you reset. So a goal is not something that has to be achieved. It has to give you direction. It'll change the way you think and it'll change the things that you do. But never ever set a goal in concrete because we don't know what tomorrow is going to bring forth, as it says in Scripture. So I always said, write them in the sand, and then rewrite them again and rewrite them again, but have that time and that process of so doing. That's very good.
Ron, we're about out of time. Let's finish with one example from your life of where you set a faith financial goal or a faith goal that can really help us see this come to life a bit. Well, I had a dramatic example just within the last two months. The Ronald Bluhin Company, this financial planning firm that I started 40 years ago in November. And so there were a lot of 40-year celebrations among the offices of that company.
I'm no longer employed by that company or working with that company, but they asked me to come to some of these events. And as I was going through my files, I found a faith goal-setting sheet that I had prepared in August of 1979. And there were eight faith goals on that that I hadn't seen in 40 years. All eight of them had been accomplished. Oh, wow.
And they were beyond what you could think or ask or even imagine. So a faith goal God doesn't forget, even if I do forget. That's great. Ron, thanks for being with us today.
This is a really important topic and we always appreciate your perspective. Well, thank you, Rob. Enjoying being here. Thanks, Steve.
Thank you, Ron. And this is MoneyWise Live. If the heavy burden of debt is robbing you of freedom and peace of mind, Christian credit counselors can help. We're a nationwide nonprofit credit counseling organization that has helped over 300,000 individuals in the last 27 years get out of credit card debt 80% faster while honoring that debt in full. To learn how Christian credit counselors can help you, visit christiancreditcounselors.org.
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To learn how, visit moneywise.org slash ncf. The word of God is quick and powerful and sharper than any two-edged sword. Here's Beth Moore with a quick word. Turn with me to Deuteronomy chapter 32. I want to read you verse 33. Now let me give you some context here because God's already warning them, boy, when you mess with me over the gods of the nations, I'm telling you, I am going to let them have some free reign where you're concerned.
I'm going to use them to teach you that is not the way you want to go. Now remember, the whole idea behind Babylon is the arrogance of man puffed up against the holiness of God. And here's what I want you to see when it's talking about, in verse 33, their wine is the venom of serpents, the deadly poison of cobras. Now I want you to think in terms, figuratively speaking here, what we're being told here in context, if you were to read the whole chapter, then you would be knowing it's talking about the arrogance and defiance and idolatry against God. And so the wine of the rebellious, arrogant, and idolatrous is symbolically the venom of serpents. Now would you just picture that with me? Because who is the serpent?
If we were talking Babylon the great, and then we were going to talk about the great serpent, our minds would immediately push rewind all the way back to Genesis chapter three, when of course the enemy infiltrated the serpent and came against the children of God. Beth and the team are thankful for the grace gift to serve you. Your letters, prayers, and support are a vital part of this program. To request this month's thank you gift, text the word GIFT to 57682. Again, text G-I-F-T to 57682, or go to bethmore.org forward slash donate. On behalf of Beth Moore and the entire Living Proof team, happy new year. It's a pleasure to have you with us today on MoneyWise Live. He's Rob West.
I'm Steve Moore. And Rob, it's been a little bit since we've done an email. This one comes to us from Bart.
He says, hi Rob and Steve, love the show, exclamation mark, exclamation mark, exclamation mark. Do you recommend that we give our kids an allowance? Ah, this is a great question, Bart. And you know, I love beginning to train kids early in how to manage money. And that's both the literacy side of how we manage money, give, save, and spend, and really beginning to talk them through all of the mechanics of it, but also the biblical side as well. Because remember, God has a lot to say about managing money and we need to make sure that when our kids leave our homes that they understand God's heart from Scripture as it relates to his money, starting with the fact that God owns it all, and that they are stewards. And so I would recommend you pick up a copy of Howard Dayton's book, The ABCs of Managing Money God's Way. If you have small children, or if they're teens, maybe even something like Howard's book, Your Money Counts, or Ron Blue's Master, Your Money.
So I think that's kind of the starting point. In terms of the allowance question, Bart, here's my approach. I think the key is that you really want to reward the right behavior. So in our home, the way we handle it is we say, okay kids, as a part of being in our family, you have certain responsibilities, chores, things that you're expected to do.
Keep your bed made and keep the counter in the bathroom clear. And you know, we have different jobs. They have daily jobs and weekly jobs that they're responsible for. And they don't get any money for that.
That's just expected. But then there's extra things that they do that they know they can earn some money. And those are selected intentionally. And then we use that money to teach for the young ones, give, save, spend. That there's money that right off the top, we want to be systematic in our giving. And then we want to save a portion for the something we're saving for down the road. And then the rest is to spend. So I like more of a commission approach, which teaches the value of hard work versus an allowance approach, which just says we give you an automatic amount, which by the way, kind of isn't really the way the real world works. But I think the key is we want to get money into their hands in an appropriate way so we can teach.
Last thing I'll say is remember, modeling is always the best. So if you spend with a budget and you talk about handling money God's way, it will rub off on them over time. And does Mrs. West give you an allowance, sir? Very little, very little. And we appreciate that. Here's another.
It's from James. He says, Is there a rule of thumb for when I should drop comprehensive coverage on a vehicle and go to liability coverage only? We have two cars. One has liability only because I bought it with hail damage. The other is a 13 year old civic with over one hundred and fifty thousand miles.
That one has comprehensive. And if we cancel that, it would provide needed breathing room in our budget. Yeah.
Great question, James. And I can certainly understand wanting to free up some expenses if possible. You know, the rule of thumb and that's all it is. But the rule of thumb for dropping collision insurance, at least one of them is to drop it when a car's collision premium plus the deductible.
So the collision portion of the premium plus the deductible costs more than 10 percent of the car's value over a 12 month period. Great question. If you have an email, send it along questions at money wise dot org. All right.
Let's go to Springfield, Missouri now. And Stan, how can we help you today? I'm a retired pastor. The church had put away funds for my retirement and I have funds that are going to be for Amanda mandatory distribution.
And I have some more time to do this. But I guess my question is, what is the difference between an IRA and an annuity? And the second part of that question is, when I'm 72, do I then also have the option to roll over the IRA into something else? Or how does that work once I'm 72 and a half? Do I have to start mandatory withdrawals without any more investment money?
Okay, yeah, let's try to tackle these. So basically, you've got the type of account, Stan, and then you've got the investments inside the account. Let's set the investments aside for a second and talk about the type of account. With an IRA and an annuity, assuming it's a tax deferred annuity, you're dealing with a basically a tax deferred instrument, where you put money in, and it grows tax deferred, meaning that the taxes are not paid on the profits or the gains inside the account, be it an IRA or an annuity, which of course, generate profits differently just based on the type of investment or the type of account that they are. But you don't pay any taxes on the gains along the way. But then as you take money out of an IRA, or if you take money out of a tax deferred annuity, then you pay the tax on it as it comes out. Now, the big difference between an IRA and an annuity, even though they're treated similarly, from a tax deferral standpoint is the way the money grows inside it.
An IRA gives you basically ultimate flexibility in terms of how you want those dollars invested while they're growing, versus an annuity, which would be depending on the type of annuity, it is either generating a fixed rate of return or some sort of investment options inside the account that are typically called sub accounts where you can either choose from them in a variable annuity. And then often, there will be a floor or a minimum that you can earn on an annual basis. But they are growing both in a tax deferred environment. Does that make sense to you? Yes, it does.
And so, excuse me, following up with that. So with the IRA, if I understand you correctly, then there is more risk. Whereas in the annuity, because of the different types of annuities, you can limit the risk to your principal. Yes, that is a true statement with the exception that you are giving up something, potential upside return. Because remember, with an IRA, you're going to capture 100% of the results of whatever you're invested in. With the annuity, there's going to be a cost to them providing that floor, if you will, on the returns. And that's often a trade off that you're going to give up some of the upside.
So, you know, often people will prefer not to use an insurance product because the returns are not going to be as good in most cases, and the fees and expenses are higher. You have a lot more control with the IRA. Pastor, we hope that helps you. We appreciate your calling in.
Thanks very much. More MoneyWise Live after this. How should we as Christians think about investing? What if we could invest our money in a way that aligns with what we believe? At Eventide, we believe it is possible to love God and love our neighbor in the very practice of investing. We design investments for performance and a better world so you can invest for the future with a sense of wholeness and purpose. We call this investing that makes the world rejoice. More information on how this investing that makes the world rejoice.
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More at moodypublishers.com. Do you feel stuck? Are you tired of going through the motions of faith? Do you want to make real progress in your life but not know where to start? How to Grow is a book to help you grow spiritually and help others grow as well.
We often see the Gospel as a starting point of the Christian life rather than the main point of all life. How to Grow, a new book by Daryl Dash, available at moodypublishers.org. That's moodypublishers.org. Buying a home is the largest, most nerve-wracking purchase most of us ever make. It doesn't help that you're entering a maze of unfamiliar words and confusing options that can leave you intimidated, frustrated, and afraid you've been taken advantage of. Navigating the Mortgage Maze by Dale Vermilion helps you clear up the confusion, unrack your nerves, and make the best mortgage decisions possible with confidence.
Navigating the Mortgage Maze, available when you click the store button at moneywiselive.org. With SRN News, I'm John Scott, the first known case of the new and apparently more contagious variant of the coronavirus has now been reported in the nation's most populous state, California. It follows the first reported U.S. case that was in Colorado.
The two cases have triggered a host of questions about how the mutant version circulating in England now arrived in the United States. California has surpassed 25,000 deaths from coronavirus, the third state to reach that number, New York, and Texas have already passed that, according to Johns Hopkins University. Snow falling in southwestern Texas, with higher elevations receiving more than one foot. On Wall Street, the S&P 500 in Dow ended 2020 at record highs. The Dow gained 196 points today, the Nasdaq was up 18, the S&P ahead 24. This is SRN News. Hey, a real pleasure to have you with us today. This is MoneyWise Live. I'm Steve Moore, that other guy over there, the guy with the answers. He's Rob West, and we're happy to have you on the program. We're happy to have you with us on the program today. However, we are pre-recorded. We won't be taking your calls, but we've lined up some calls in advance that I think you'll find interesting, helpful, and very, very practical.
At least we've tried to make them that way. So stick around. This is MoneyWise Live.
Let's go directly to our phones. Lorena in, is it Akron, South Carolina? Help me, Lorena. It's Aiken, South Carolina.
Oh, it's Aiken, South Carolina. I'm sorry. I read my board incorrectly. What's on your mind?
I have a question. I'm putting 12% into my 401k, and my company matches 8%. And then I'm going to bump it up to 15% this year, and then possibly 20% next year. Is that a wise decision to put that much in there?
Or should I take that difference of like the 8% and put it into a Roth 401k, or maybe something else? Yeah. Okay. Well, Lorena, these are great questions. And I think the first kind of fundamental question is really more philosophical about your goals and objectives. And then the second question is a little bit more tactical related to which specific account should receive any contributions you're going to make moving forward. Is it just the current 401k you're invested in?
Or is it some other type of account? Meaning if you have the option to also have a Roth 401k, should you open one of those? Should you do it in a Roth IRA simultaneously? And we can deal with that secondly. So let's start with the philosophical. Have you done some planning, Lorena, to determine, first of all, what are your goals and objectives? Meaning, do you feel like you're living at the lifestyle God has called you to? Are you trying to increase it or perhaps even decrease it? Do you want to increase your giving? Do you have some savings goals that you've established, both short term and long term?
And how are you doing on those? And then for that big long term goal that we call retirement, and by the way, we look at retirement a little bit differently as believers, but we can get into that some other time. But for that longer term retirement goal, which I like to call a financial finish line, have you established a number? Meaning, do you know what you're working towards? We don't want to accumulate just for accumulation sake. We want to prayerfully consider what God has called us to.
And if we're trying to replace an income, what is actually needed based on the fact that, Lord willing, will be completely debt free and whatever lifestyle you feel like he's called you to that you want to be able to maintain, recognizing you'll have various income sources during that season of life, perhaps a Social Security and other sources of income. And then that will help you determine what you're ultimately working toward. And that really does require some planning.
So perhaps that's more than you've thought of or maybe not. So tell me a little bit about where you're at in some of that planning. Well, Michael, I'm 56 and I would like to retire at about 65. And then my thought was is if I go ahead and put in, you know, up to 20% by next year, I would be able to do that. And then to be able to get my full benefits from Social Security at 67, I could kind of be frugal and live off the 401k for two years.
I am married, my husband works and has an IRA. And so with both of our income, I would think that I'd be able to do that. My other goal was, we're planning on selling our home and land.
We purchased some land already, and we were going to build a house next year. And that was one of the other questions I had. And I'll get to that in just one second. All right.
Well, that's helpful. And I think, you know, it sounds like you have thought about this, I would probably go to the step of, if you haven't already, looking at what will our retirement budget look like based on where you feel like the Lord will have you in that season of life based on what he has you doing and where you'll be living and all of that. And then what is it going to take to fund that lifestyle? I like this idea that these excess contributions would be used for a couple of years, while you wait to get the maximum or at least the full amount for your Social Security. So I don't have any problem with that, as long as I would, you know, recommend you do some planning to that end with a financial planner to make sure, you know, you've really analyzed those numbers. In terms of where to put it, you could certainly bump it up inside the 401k. I kind of like the idea if you have the option of a Roth as well, of having the Roth alongside the current traditional 401k, where the bulk of your contributions are getting, you're getting the tax deduction now and tax deferred growth. But then you also have this other pool of funds where it's after tax dollars, but it's growing tax free, which is not going to be subject to the required minimum distribution. And if tax rates are higher down the road, you'll have a growing amount of money for the next 10 years that has already been taxed at what could arguably be some of the lowest tax rates that we've seen, and perhaps we'll see depending on what happens politically, you know, down the road. So I think having these two options is a good idea as to whether or not you should go from 15 all the way up to 20. That's really just a math equation that I would get some help with from a financial or retirement planner.
Okay. And should I use, because my goal was if we sold our home, and we built a house, my goal was to live in the home until our house is built, but I would, I, my thought was is my husband would be 59 and a half and he could draw from his IRA to be able to meet the house payments until our house is built and then sell our place now and then take all that and put it on the new house. So we would be pretty almost, you know, we wouldn't be debt free.
We wouldn't owe a whole lot on it. Would that be a wise decision? You know, I think if that's the only source of funds to do that, I mean, obviously one option would be go ahead and sell the property and perhaps you'd, you know, rent it back from the new owner or, you know, move to something smaller temporarily while you build. That's going to avoid you having to carry two mortgages. Apart from that, is there another source of funds you can draw from if you just really feel like you want to stay and only move once? I realize it takes a while to build a home from scratch.
So, you know, again, it all comes back to the planning and does this make sense, you know, on paper but I don't have anything philosophically wrong with what you're describing in terms of pulling from your husband's account given that you're not going to be paying the penalty but you do have to factor in the added taxes. Lorena, we're glad that you got through today. Thank you very much. We appreciate your call.
Alex and Arlene, we are coming your way. Please hang in there with us. Rob, we have an email question. We haven't done an email in a while.
This one comes from Charlie. He says, Dear Rob and Steve, we've been married for 16 years and not good at managing money. We live paycheck to paycheck. Whenever we put ourselves on a budget, expenses come out of nowhere. I don't want to complain and I do know that God provides but what are we to do?
Yeah. Well, Charlie, I think this is probably coming down to your budget not being an accurate reflection of reality. Listen, we all know that the unexpected comes. The key is are these truly unexpected expenses or are they expenses we should have anticipated? They just don't come every month and somebody doesn't send us a bill necessarily. So I'd go back to work on that budget and really take a hard look at what should we be putting away? You know, we should be putting away one percent of the value of the home every year in a maintenance because we know homes have wear and tear and they're going to break down and so therefore we need to have a fund that's being replenished for us to take care of that routine maintenance or perhaps not even routine maintenance. We need to be setting aside money for auto repair assuming we don't have a warranty in place and even if we do, we've still got to replace the tires and the brakes and make sure to keep the oil changed.
We've got to anticipate quarterly payments to insurance and homeowners association so take another look at that budget make sure everything's in there and I think you'll have a different experience next time. More MoneyWise Live with Rob West after this. Please stick around. Siri, I need some help.
What's up? Well, sometimes I feel like I can't get a handle on my money. I mean, where does it all go? Hmm, it sounds like you need the MoneyWise app. It's a free app that will help you plan your budget and track your spending. Oh, like the three dollars you spend every morning on coffee.
Well, not every morning. You'll also get access to free biblical financial advice. Sounds awesome. Let's do it.
Okay. Searching for more moneywises.com. Learn more at app.moneywise.org. God cares a great deal more about our money than most of us imagine. In fact, Jesus says more about our use of money and possessions than about anything else, including both heaven and hell. In managing God's money, author Randy Alcorn breaks it all down in a simple, easy to follow format that makes it the perfect reference tool if you're interested in gaining a solid income. God cares a great deal more about our money than most of us imagine. If you're interested in gaining a solid biblical understanding of money, possessions, and eternity, Learning God's Money is available when you click the store button at moneywiselive.org.
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That's moodyjobs.org. This is our final segment of a broadcast we previously recorded. Thanks so much for being with us today, and we hope you'll stick around and enjoy the rest of the program. So let's begin. Rob, we have about eight, nine minutes here.
Let's kind of put the pedal to the metal and see how many calls we can tackle, all right? I like it. Yeah. All right.
Lafayette, Indiana. Alex, you're on, my friend. How can we help?
Hi. Yeah, so my wife and I are recently married, or relatively recently, and we've got about $40,000 in cash savings that we're trying to allocate to the right places. So I'm in grad school. I picked up about $18,000 of student loans. That's really our only debt. We're thinking that we want to just pay that off with the savings and then kind of go from there saving for a home and stuff. So I'm going to be finishing up school in a couple of years. So the other thought would be to put more of that towards saving for a home and then pay off the loan kind of as we go. But we're leaning more towards paying it all off and just kind of want to get some more feedback on that.
Yeah. Alex, what are your monthly expenses, if you don't mind me asking, roughly? Yeah, expenses are right around $3,500, probably. Okay. So $3,500, if we said we wanted to try to hang on to three months expenses, we'd need about $10,500.
So you'd be right there. And what did you say? You said the balance was about $18,000.
You have about $40,000. Is that right, Liquid? Yeah.
Yeah. For me, this is a no brainer. I'd knock that out. Go ahead and completely eliminate the student loans.
Be done with that. You've still got more than half your money available. You've got basically six months expenses at that point. Plus, you're now adding back into the budget the amount you were sending to the student loans. You're debt free. And you can really begin aggressively moving toward your next goal, which sounds like might be saving for the down payment. I realize this perhaps could delay slightly the purchase of the home because we're going to want you to have 20% and not have a mortgage of more than where your PITI is more than 25% of your take home. But I think you're going to have a lot more peace of mind knowing that you're out of debt. You're not going to string this out and pay a lot of interest.
You're guaranteed the return equivalent to the interest rate you were paying. And I just I think as a young couple, that's a great place to be. Alex, thank you very much.
Indianapolis next. Arlene, what's your question for Rob? I'm trying to figure out if there is a way to consolidate student loans. My daughter had to have us do Parent PLUS loans as well as the small amount that she was able to take out. And she is currently paying us, but she would really like a way to consolidate the Parent PLUS loan with her loan in order to have one payment rather than two large payments every month.
Is there a way to even accomplish that or are we just in this mode for how many years to take the pay off? Yeah, Arlene, are you trying to accomplish a simplification of the payment or are you trying to take your name off of the loan? Well, I think she wants to have our name off of it and into her own name. And, you know, she's currently putting money in our account every month and I'm making the payment for her, but she would really essentially like to have it all in her name to consolidate it all for one payment.
Yeah, and that's what's going to be challenging. You know, you can't transfer the Parent PLUS loan to a student. If you borrow a Parent PLUS loan for your child's education, you're the one legally responsible for repaying the debt. Really, the only thing that could be done is to, in a sense, refinance the loan in her name by taking out a new private loan in that amount and in a sense paying off the Parent PLUS loan.
Not all private lenders will do that type of refinance, so you're going to have to check around. The downside is, of course, she'll have to qualify for that new loan on her own, which could be challenging based on her credit score and income and so forth, given that she's just starting out. And she'll give up the protections afforded through the federal loan program, which include not only the loan forgiveness programs, but more importantly, if you get into a situation where you need it, the income contingent repayment caps, where you'd have the ability to pay less based on a hardship and as a percentage of income. So, unfortunately, she's going to have to probably stay with these. The good news is, she can continue to pay them if that was your agreement, as if they're her own, but refinancing and getting them out of your name is going to be difficult.
The Parent PLUS loans can be consolidated through a federal direct consolidation loan, but that's still going to have you as the ultimately responsible, as the responsible party. And I hope that helps though, Arlene, and we appreciate your call today. Thanks very much. Down to Miami, Miami, Florida. Hello, John, what's your question today for Rob West?
How can we help? Mr. West, how are you? Good, John, thanks for calling. Listen, I went by my FICO score, you know, that model 8? Yes. And so, I sent my documents to like three different lenders and it seems like I'm on the second lender now and they use the same one, five.
So, I'm coming back at a 616. Okay. He asked me about buying points and I tell you, I am just so lost about this because I don't want to.
What's the pros and cons of buying points? Because I was trying to get in the subsidies, anything that would help us with down payment, you know, closing. Yeah.
Okay. So, yeah, he's not talking about buying up your credit score, he's talking about buying down the interest rate, is that right? Yeah, I guess it would be that right. Yeah, these are called discount points, John, and basically you can, in a sense, on the front end, buy a lower interest rate for your mortgage. It's basically a form of prepaid interest. So, you know, when you first take out the loan, you can lower your monthly payment and the overall cost of borrowing through discount points, which is, you know, 1% of your loan. You know, I think if in your situation really you have limited resources, I think the key for you is to, you know, shop around, get the very best rate you can. If you have the ability to buy it down, you certainly could explore that, but I want to make sure you have at least 20% in the form of equity before you're buying down the interest rate, because that's money that you're not going to have toward principal, and I want to make sure you have good equity in the home. So I'm probably, in your situation, not as big of a fan of that option as I am you just trying to qualify for the very best loan you can, recognizing you can refinance down the road if for some reason your credit score improves. Now, if you had the resources available, you can still do the 20% down payment and you can buy that point down, the points down.
Well sure, that's going to save you money over the long haul because that's a lower interest rate you're paying on for the life of the loan, and that's never a bad thing, but I'd want to make sure you have at least that 20% down payment. And hey, John, thanks for calling. We appreciate it, John. Good to speak with you again, buddy. God bless. Thanks so much.
And we might be able to squeeze in one more. Dalton, Illinois. Anthony, how can we help, sir? How y'all doing today? Wonderful. Thank you. All right. God bless you guys. God bless your program and all those good things.
Thank you. This is fantastic because God's really been on me, so to speak, the Holy Spirit's been on me to get my credit in order. And I've really been on a fierce task to try to get this, get my credit in order.
I am at, right now with the Experian, and I'm still learning about credit, but I imagine Experian is the, or from what I think I figured out, Experian is like the head dog of the, so to speak, credit. If you have any late payments like I have, I accumulated approximately maybe 14 late payments on my mortgage, and that's when I was kind of struggling with my finances. But I'm back on track, and this April, I'll be coming after two years of on-time payments. Okay.
But my score is still at 603, and I've been trying to figure out how to go about improving it because when I apply for credit cards, credit cards, imagine they're going by that credit score with the late payments, and I get a rejection for credit cards. Yeah, sure. And I contacted my mortgage company. I've done that already.
I wrote them a sympathy letter, and they sent back and said that they could not take those late payments off. Yeah, yeah. Well, let me give you some counsel here, Anthony. I appreciate your call.
Unfortunately, we're up against the end of the program. First of all, I think you're doing the right things in the sense that you know clearly that you've been two years of on-time payments, and your repayment history makes up the largest percentage of that score. So the extent to which you are an on-time payer every month moving forward is a really good thing. That's your payment history. Then it's your amounts owed. Do you have balances that you're carrying higher than 30% of the overall credit you have available? That's what's called your credit utilization.
That's 30% of your score. Then the length of your credit history. How long have your accounts been open? And then there's new credit, meaning the inquiries you have, and then your credit mix.
What type of credit do you have extended to you? The end of the day, what you need to focus on is being an on-time payer. Those late payments, if they're accurate, there's nothing you can do about it. Don't buy into this, you know, this trap or scam where people can tell you, you pay them some money, they can get this stuff taken off.
It's just not possible. Fair Credit Reporting Act says if it's accurate, it stays for seven years. But as it gets further and further in the past, it will impact you least. And the other thing is I'm not really crazy about you having a credit card right now.
I'd rather, if you need one, go get a secured credit card at your bank. So stay the course and be an on-time payer and you'll see that score come up over time. Anthony, we do appreciate your call. Thank you so very much. And Rob, speaking of time getting the better of us, we're about ready to close out the year. Any final thoughts?
Well, that's exactly right. It's been an incredible year, but we have so much more planned for next year. And here's where you can help. If you love this radio program, would you consider a year-end gift?
Here's the good news. Every dollar given before midnight tonight will be doubled. So double your impact when you go to MoneyWiseLive.org and click the donate button. That's MoneyWiseLive.org, click donate. Thanks, Rob. MoneyWiseLive is a partnership between Moody Radio and MoneyWise Media. Thanks so much for your prayers and your financial support. Happy New Year and join us again next time.
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